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UNITED STATES OF AMERICA. 























PRACTICAL ILLUSTRATIONS 


OF 

LIFE INSURANCE 



BY 

JOHN J. HABR1CH 

INDEPENDENT INSURANCE AGENT 

ESTABLISHED 1 859 

18 AND 20 LIBERTY STREET 
NEW YORK 



/ 


COPYRIGHT 1888, BY JOHN J. HABR 1 CH 


NEW YORK 

GILLISS BROTHERS AND TURNURE, ART AGE PRESS 
400 AND 402 WEST 14TH STREET 










CONTENTS. 


Prefatory, ........ 

Tables of Illustration, ...... 

Remarks on Tables, ...... 

Instability of Assessment Societies, . 

Analysis of Assessment Societies in New York State, 
Assessments Must Increase with the Aoe of the Insured. 

o 

The Assessment Contract, .... 

Liability of Certificate-Holders, .... 
From “ The Independent,’’ ..... 


PAGE 

3-4 

5-12 

13-14 

15-16 

17-18 

19-20 

21 

22-23 

24 


FOR SALE BY 


John J. Habrich. 

Gilliss Brothers & Turnure, 

Gilliss Brothers & Turnure, 

Addressing, Duplicating and Mailing Co., 


18 and 20 Libe“ty Street, New York. 

400 and 402 West 14th Street, New York. 

1 West 25th St., Madison Square Bank Building. 
49 Dey Street, New York. 


PRICE, ONE DOLLAR. 









Prefatory to Diagrams and I ables. 


I N comparing and contrasting the two methods of Life Insurance now 
prevailing, commonly called Assessment and Regular Insurance, we 
have striven to avoid personalities and only to illustrate the practical 
working of both methods. 

In order to make this comparison, we have selected from the 
assessment societies one of the largest and apparently the most successful, 
which claims to have in force certificates for over $150,000,000—and there¬ 
fore may be fairly taken as their banner representative. 

On the other hand, we have drawn our examples from the work¬ 
ings of regular companies over forty years old, based on a scientific sys¬ 
tem which has stood for “ generation after generation," assuring them con¬ 
tinuous existence. 

In the following diagrams and tabular comparisons we have striven 
to do full justice to the assessment plan, and if we have erred at all 
it has been in their favor. On the one hand we have assumed for them a 
lower cost of insurance than they can fairly expect to experience, and on 
the other we have predicted for the regular companies, dividends much 

less than they have paid and are now paying. 

We have thus assumed that in the first year of assessment insur¬ 
ance the cost is only 50 per cent, of the rate according to the American 
Experience Table, the second year 60 per cent., the third year 70 per cent, 
and so on to the sixth year and after, when only the full rates of that low 


mortality table are assumed to prevail. But few of the regulai life com¬ 
panies with their trained medical examiners have had such a favorable 
experience as this, and the most phenomenal of the assessment societies 
charge at least one-third more to provide disaster-deferring funds which 
are to be divided after fifteen years (a longer time than any such society 
has yet successfully existed, see page 17). As we pay no attention to the 
great additions to the present annual cost made for the sake of creating a 
dividend fund, we of course can fairly disregard all prospects of such 
problematical returns. 

To the assumed mortuary cost for a $10,000 certificate, we have 
added only the admission fee of $40 and the annual dues of $30, exacted 
to cover the expenses, though in the banner society the expenses for 1887 
were $134,000, or 32 per cent, in excess of the sum of the annual dues and 
admission fees for the year, despite solemn pledges that expenses should 
be limited to the amount collected for that purpose. 

The difference in annual cost, at first much in favor of the assessment 
plan, rapidly decreases, and at the first black cross-line between the two col¬ 
umns the net total costs on the two systems have become practically equal. 

At the second black cross-line, it will be observed that the annual pay¬ 
ments have become nearly the same on both plans ; and we call attention at 
that point to the fact, that the excess of total payments on the regular system is 
more than offset by the Cash Surrender Value then collectible by the insured. 








4 


PREFATORY TO DIAGRAMS ANI) TABLES 


Further down we have drawn a third black cross-line at the point 
where the total payments on the two plans will have become equal, and call 
special attention to the cash value then available on the regular policy, 
while there is no such feature connected with the assessment certificate. 

Still lower down we contrast the total payments at the time when 
the regular policy becomes payable in full as an endowment, while the 
assessment certificate is still a source of expense. Taking age 25, as 
example, we see the astounding result, that when the cost of the certificate 
has become over $13,000, which is all loss unless the holder continues to 
pay the yearly increasing charges until his death , the other draws cash 
$10,000, the full amount insured, to be enjoyed the balance of life. 

To the uninitiated or layman, the last amount charged as cost, to be 
paid during the last year (/. e ., $10,030), may seem strange; but it is the 
correct figure laid down in the American Experience Table (accepted by 
all insurance societies and by most state governments), plus $30 the annual 
expense dues: as all are supposed to die, the cost is 100 per cent. 

Should a person still hold a certificate at the age of 95, his pay¬ 
ments during that year must be $10,000 plus the $30 for annual dues; 
unless forsooth, the society would “ rob Peter to pay Paul " and charge 
the younger members more than their just share. 

The increase according to actual age is a matter of law, an impera¬ 
tive duty, and obligatory on the association to enforce in order to do even 
justice to all its members; for when a young person insured for $10,000 at 
age 25 is increased only 66 cents per annum at age 26 for having become 
one year older, a person aged 40 is increased $2.14 at 41 ; aged 50, $7.60 
at 51 ; aged 60, $21.87 at 61 ; aged 70, $56.72 at 71 ; aged 80, $141.39 at 
81 ; aged 90, $779.22 at 91, and aged 94 even as much as $1,428.57 on a 


$10,000 certificate. Of course all intermediate ages are increased in pro¬ 
portion, to illustrate which we here give the entiie table. 


AMERICAN EXPERIENCE TABLE. 

NET PAYMENT REQUIRED DURING ANY YEAR, ACCORDING TO THE AGE THEN ATTAINED 10 INSURE 
$10,000—IN CASE OF DEATH IN THAT YEAR; COST INCREASING FROM YEAR TO YEAR. 


AGE. 

AMOUNT. 

AGE. 

AMOUNT. 

AGE. 

AMOUNT. 

AGE. 

AMOUNT. 

AGE. 

AMOUNT. 

IO 

$74 9° 

28 

$82 64 

45 

$m 63 

62 

$312 92 

79 

$1,317 34 

I I 

75 '6 

29 

83 44 

46 

115 62 

63 

339 43 

SO 

1,444 66 

12 

75 42 

3° 

84 26 

47 

120 00 

64 

368 73 

81 

1,586 05 

13 

75 69 

3 1 

85 10 

48 

125 09 

65 

40 29 

82 

1,742 97 

H 

75 96 

32 

86 07 

49 

131 06 

66 

437 07 

83 

1,915 61 

15 

76 33 

33 

87 17 

50 

137 81 

6 7 

476 47 

84 

2,113 59 

l6 

76 60 

34 

88 30 

5i 

145 41 

68 

520 02 

85 

2,355 52 

17 

76 88 

35 

89 46 

52 

153 89 

69 

567 62 

86 

2,656 81 

18 

77 26 

3 6 

90 88 

53 

163 33 

ip 

619 93 

87 

3,030 20 

19 

77 65 

37 

92 43 

54 

173 96 

71 

676 65 

88 

3,466 92 

20 

78 04 

38 

94 08 

55 

185 71 

72 

737 33 

89 

3,958 63 

21 

78 55 

39 

95 86 

56 

198 85 

73 

801 78 

90 

4,445 46 

22 

79 06 

40 

97 94 

57 

213 35 

74 

870 28 

91 

5,324 68 

23 

79 58 

4 i 

100 08 

58 

229 36 

75 

943 71 

92 

6,342 59 

24 

80 11 

42 

102 52 

59 

247 20 

76 

1,023 11 

93 

7,34i 77 

25 

80 64 

43 

105 17 

60 

266 93 

77 

1,110 64 

94 

8,571 43 

26 

27 

81 30 

81 96 

44 

108 29 

61 

288 80 

78 

1,208 27 

95 

10,000 00 


THE ABOVE AMOUNTS DO NOT INCLUDE ANY PROVISIONS FOR EXPENSES. 


The distinguished actuary, Sheppard Homans, the author of the 
above table, in a treatise published May io, 1888, says: 

“ The attempts by so many co-operative or assessment companies 
to furnish insurance by assessments based upon the age at entry, and 
which rates do not increase with age, must inevitably result in disappoint¬ 
ment and disaster. Natural laws may not be violated with impunity. 

The above official table will enable the reader to test for himself 
the correctness of our figures, as to the cost of assessment insurance in 
the following charts, to which we now invite attention. 
































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policies have averaged from one-fourth to one-third larger than we have assumed above, 

consequently the actual cost will probably be much less than estimated. 

In fact, as stated on page 3, the deviations of actual results from our figures will very 

certainly be in favor of the regular companies and against the assessment societies. 

















































































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In several regular companies the dividends for five years past on Life Rate Endowment 

policies have averaged from one-fourth to one-third larger than we have assumed above, 

consequently the actual cost will probably be much less than estimated. 

In fact, as stated on page 3, the deviations of actual results from our figures will very 

certainly be in favor of the regular companies and against the assessment societies. 
















































































































































































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In several regular companies the dividends for five years past on Life Rate Endowment 

policies have averaged from one-fourth to one-third larger than we have assumed above, 

consequently the actual cost will probably be much less than estimated. 

In fact, as stated on page 3, the deviations of actual results from our figures will very 

certainly be in favor of the regular companies and against the assessment societies. 




















































































































































Remarks on the Foregoing Tables. 


A FEW minutes careful perusal of the foregoing - tables must convince 
the most skeptical of the utter absurdity and fallaciousness of the 
idea, that assessment insurance can be a permanent success. 

The result of placing the two methods in juxtaposition, as done 
by us, will surprise most of the insurance profession even; and it is 
strange that such an expose was not made long ago. 

These tables make clear to all the deceptiveness of the vaunted 
cheapness of the assessment method. The first black cross-line of “ equal 
net cost," as found after deducting the cash value of the contracts from the 
payments made, is reached at latest in these tables in eight years—despite 
our favorable treatment of the assessment plan—and ever after that for the 
rest of life the comparison of net costs is more and more in favor of the 
regular system. 

Beginning with the table for age 25, at which age a person has an 
expectation of living 39 more years according to the experience of life 
insurance companies, we ask, will a person at that age, in opposition to the 
experience of generations, select a plan which is cheaper for only seven 
years, and thus wager five or six to one against his own vitality, which 
should be good for forty years ? 

Will a person, however economically inclined, see any actual saving 
in retaining a few dollars for only seven years, when the chances are five 
or six to one that they will cost him so dear as to cause him life-long 


regret ? This fact is sufficient to explode once for all the pretended 
economy of the assessment scheme, even if the plans were honestly 
carried out, at the lowest expense for temporary insurance. How will it 
prove then in actual practice, when in one year, in the banner association, 
$134,000.00 was diverted from the mortuary or reserve fund and used for 
expenses ? In fact, the assessment plan has no raison d'itre, either finan¬ 
cially or morally. Well may these managers promise any amount of 
doubtful benefits to be enjoyed (?!!) by the certificate holder after 
fifteen years, when the turning point is sure to occur in half that time. 

Let us now proceed to the second cross-line and see how matters 
stand at that point between regular insurance—good for present 
and future—and temporary assessment schemes. This line marks the 
time when each plan costs an equal amount annually, provided always, 
that the assessment plan has been honestly managed at the low rate 
that we have assumed for it. As a matter of fact, however, the turning - 
point does come much earlier, for, while the charges actually made by the 
acknowledged leader of the assessment associations are actually higher 
than given in the tables, the assumed payments to the regular old line 
companies are higher than should be the case in view of the dividends 
actually paid for years past. 

On this second line we find equal yearly payments, which means 
that the assessment charges have by degrees come up to a certain amount; 









PRACTICAL ILLUSTRATIONS OF LIFE INSURANCE. 




at the same time the regular insurance charges have, by virtue of increased 
dividends, come down to a similar amount. Supposing that both persons 
began at age 40, they now have been insured for only 17 years, which 
time is only 60 per cent, of their natural expectation of life from age 40, 
with this relative difference, that the assessment certificate-holder, with his 
up-hill contract, has, financially speaking, a frightful future before him, with 
nothing to draw against—and no cash surrender value to use as collateral 
security in case of need. Meanwhile the genuine life insurance policy¬ 
holder can smile complacently, as his premiums for the balance of his term 
are being constantly decreased, until, having arrived at a respectable age, 
the total amount is paid to him; and what is of equal importance and 
comfort to him, he has a considerable amount already available in case of 
emergency, say $3,500.00. which amount is constantly increasing as he pays 
additional premiums. 

In some very rare cases it happens that a person has no longer any 
need for insurance; the certificate holder in that case, at this second line, 
of equal yearly payments, has paid heavily and can get no return. The 


policy-holder on the contrary, can collect a respectable sum as his surren¬ 
der value, which if deducted from his payments to that date, will show a 
very small net cost. 

Going to the next and third stage of our illustration where the 
total payments to date are equal , we find the situation such that the certifi¬ 
cate-holder will deplore his short-sightedness, or the deception practiced on 
him, he having already paid nearly the entire amount of his insurance, the 
annual cost of which being very large, deprives him and his family of 
many of the enjoyments of life, with still a most fearful increase of the an¬ 
nual cost before him; while the policy holder has only to persevere a few 
years longer in paying his still constantly decreasing premiums, when he 
will receive the full amount of his policy to enjoy with his family the 
balance of life. 

These few years, however, he does not need to wait, should he be 
satisfied with an amount smaller than the face of his policy, an option 
which is often exceedingly opportune, as he can then collect the major 
portion of his insurance. 


We trust that the reader has carefully examined our illustrative tables, which must be clear 
to every mind of average capacity: having done so, we fear not but that he will select the right 
system, if he is about insuring; or change immediately , if he has made the mistake, that we and 
others did years ago—in that case we will only add, CHANGE AT ONCE. 











The Instability of 


T ill, tii st question which will occur to any man insuring his life is, 
whether the institution into which he pays annually his hard-earned 
savings is of an absolutely permanent character, that he may be sure it 

will be in existence and able to pay when his policy or certificate becomes 
a claim. 

By insuring in regular companies a man may be perfectly easy on 
this point, as they are compelled by law to hold solid assets, called legal 
reserves, sufficient to make good their contract with each policy-holder, in¬ 
dependently of future contingencies. 

In assessment insurance this element of absolute security does not 
exist,—not even approximately. In order to prove this we publish the 
figures from a book, entitled “ Assessment Insurance,” published pre¬ 
sumably in the interest of assessment societies from the office of The 
Spectator Company, No. 16 Dey Street, New York, and giving the 
standing of 450 associations in existence January 1, 1888, or at least 
as much of their condition as the societies deemed best to make public. 
Therefore, taking our figures from the book published if not by them at 
any rate for them, we cannot be charged with unfairness or insincerity. 
We select those of their banner society or representative association, at 
pages 224 and 225. These are its own record of its business, written 
during the several years, and the actual net result or actual increase from 
year to year; so as to enable the reader to draw his own conclusions, 
whether the institution is in a progressive or in a declining condition. 


Assessment Societies. 


The steady increase in the percentage of lapses during the last three 
years as shown in this table, seems to prove that the crisis is near at 
hand—the time when the lapses having become over 100 per cent, of the 
issues, the aggregate business will diminish and then melt away with con¬ 
stantly increasing rapidity. 

Losses and Lapses of an Assessment Association, from its own state¬ 
ments for the years 1881 to 1888. 



Insurance in force 
beginning of 
Year. 

New Insurance 

Should be in force, 

Actual in force, end 

Losses and Lapses. 

u 

JH 

Written. 

end of Year. 

of Year. 

Amount. 

Per Cent, on 
new Insurance. 

l88l 


Not stated. 

Not stated. 

$ 7 , 6 33 ,ooo 






00 

OO 

$7,633,000 

it it 

it a 

35,190,750 







1883 

35,190,750 

$31,482,250 

$66,673,000 

63,328,500 

$3,344,500 

10.62 

1884 

63,328,500 

38,975,750 

102, 124,250 

rf 

v/-) 

in 

00 

16,672,250 

42.97 

1885 

85,452,000 

51,001,500 

136,453,500 

123,353,500 

13,100,000 

25.68 

1886 

i 2 3 . 353 » 5 oo 

57,050,500 

180,404,000 

150,175,250 

30,228,750 

52.98 

1887 

1888 

150,175,250 

156,554,100 

35,323,100 

185,498,350 

156,554,100 

28,944,250 

80.19 







The forlorn-hope move now made by them to fresh fields and 
pastures new ,—England, France, etc., will avail nothing. In the old 
country where money is valued much more than here, people do not 
make life contracts in the haphazard way we do here. They are most 





































16 


PRACTICAL ILLUSTRATIONS OF LIFE INSURANCE. 


likely to find out the impracticability of the system, before they 
invest money in it, and we doubt very much whether the Association 
will get even a foot-hold there, advised as the people will be from 
this side in time to avoid expensive experiments. Nor will they so readily 
sign contracts by which they are bound to pay anything that the officers 
may deem fit to charge. They generally read every line most carefully 
before signing, never mind how small the print,—and if the application and 
certificate refer to each other and also to Constitution and By-Laws, as the 
foundation of the contract, they will insist upon seeing what these By- 
Laws are, study them carefidly and find out what they bind themselves to, 
before they accept or pay for a certificate. 

If Europe does not respond promptly and help the false “system” to 
exist here for a little while longer, it is very plain that the lapses must soon 
exceed the issues. We predict in advance, from circulars which come under 
our notice, that a great effort will be made to show a large increase in 
new members the last two months of 1888. We will not comment on the 
manner such “ increases ” are often obtained. Admission fees and annual 
dues may be forborne for the sake of getting new members, and new 
certificates may be issued broadcast to John Doe , Richard Roe, etc., inas¬ 
much as the first assessment for the new members of December cannot be 
made until after January 1, 1889, and after the officers have made affidavit 


to the different Insurance Departments that they have issued so many 
certificates in the year; but we are curious to know how many of them 
will pay assessments during next year. We let the Superintendent of 
the Insurance Department of the State of Maryland speak. The Hon. 
Jesse K. Hines, in his report for 1888, says : 

“ The business of life-insurance companies should, of all others, be invariably con¬ 
ducted in a manner to merit and command the confidence of those who deal with them ; 
and a practice such as the one referred to, of swelling the apparent volume of business by 
policies which either never become completed contracts or are issued for inadequate consider 
ation —a practice which is so easily abused, and has been and is resorted to sometimes 
for the purpose of concealing the actual condition of a company’s affairs—cannot be viewed 
otherwise than with suspicion.’’ 

Again, as “ necessity is the mother of invention,” the number of 
lapses can be withheld from the Insurance Superintendents and the public, 
by giving members additional grace—instead of one month—six and 
twelve months; what unheard of generosity! Unsolicited generosity ! 

Take this element of concealment and add to it the possible element 
of fictitious issue referred to in the report of the Superintendent of the 
State of Maryland (as above), and you may come nearer the “ true inward¬ 
ness ” of a concern, which, when divested of its artificial surroundings is a 
mere shell, and as now carried on, a gross injustice to its members. 









[From The SPECTATOR, November 15 (Revised ).] 


An Analysis of the 


Co-Operative L ife Associations in the New York State Insurance 

Report, Issued 1888. 


U N I IL about live years ago the co-operative life associations fortified 
themselves with the idea that there were scores of similar societies 
in England from ioo to 200 years old, whose supposed long continuance 
they argued as proof of the stability of their system. 

This claim, however, had to be abandoned when $100.00 was offered 
by the writer for proof of the existence of one single such assessment so¬ 
ciety for 100 years, either in England or anywhere in the world. That offer 
was supplemented by another of a reduced amount for any case of a co¬ 
operative business insurance association in a flourishing condition, and 
over fifteen years old, but no instance was offered by any one. 

Curiosity recently led the writer to examine the reports of the vari¬ 
ous assessment societies doing business in this State, in order to see how 
the older ones are faring at this date. The result of this investigation is 
mven below: 

Omitting sick-benefit and purely accident insurance societies, there 
are 150 life insurance associations reporting to the New York Insurance 
Department, and these may be divided into two classes, viz.: Societies on 
a business basis and those of a fraternal character. 

The societies considered to be on a fraternal basis are those which 
either pay no commission at all, or else only very small bonuses, not large 
enough to induce any one to make a business of soliciting persons to join 
them. 


FRATERNAE SOCIETIES. 

There are seventy-nine “fraternal” societies, forty-two of which are 
under ten years of age; twenty-two from ten to fourteen years old ; and 
fifteen are fifteen years old or more. 

From Ten to Fourteen Years Old. 

These from ten to fourteen years old fared during 1887 as follows: 

Albany Boatmen’s Relief, organized 1874, membership DECREASED from 1,083 to 946. 
American Legion of Honor, 1878, increased from 60,145 to 62,111. 

Benai Berith (Jewish), 1878, no particulars of membership. 

Brooklyn Mutual Aid, 1875, DECREASED from 183 to 158. 

Catholic Knights of America, 1877, increased from 16,015 to 16,645. 

The Covenant Mutual Benefit, 1877, increased from 24,844 to 27,282 
Dry Goods Mutual Benefit, 1876, increased from 612 to 643. 

Foresters Endowment Fund, 1874, increased from 2,412 to 2,430. 

Free Sons of Israel, 1874, no particulars of membership. 

German Masonic, 1878, DECREASED from 245 to 243. 

Gold and Stock Life, 1878, increased from 176 to 418. 

Jewelers’ League, 1877, DECREASED from 2,939 to 2,817. 

Knights of Honor, 1874, decreased from 126,169 to 122,912. 

Kn ights of Pythias, 1877, increased from 16,278 to 17,083. 

Knights Templar and Masonic Mutual Benefit, 1878, increased from 5,026 to 5,287. 
Masonic Life Association, 1875, increased from 348 to 379. 

Mutual Benefit of Suffolk County, 1876, increased from 1,125 to L 353 - 
Northwestern Masonic Aid, 1874, increased from 37,020 to 41,243. 

Odd Fellows Provident, 1875, DECREASED from 732 to 703. 

Royal Arcanum, 1877, increased from 70,823 to 79,171. 

Royal Templars, 1877, DECREASED from 15,493 to 14,665. 

United Workmen, 1874, increased from 23,465 to 27,033. 
















i8 


PRACTICAL ILLUSTRATIONS OF LIFE INSURANCE. 


Over Fifteen Years Old. 

Those in existence fifteen years or more are: 

Albany Mutual Benefit, 1873, DECREASED from 660 to 631. 

Bank Clerks’ Mutual Benefit, 1869, increased from 1,171 to 1,251. 

Bookbinders’ Provident, 1868, DECREASED from 778 to 643. 

Brooklyn Masonic Mutual Benefit, 1867, increased from 954 to 1,379. 

Commercial Travelers, 1872, DECREASED from 3,064 to 2,981. 

Expressmen’s Mutual Benefit, 1869, DECREASED from 3,267 to 3,113. 

Insurance Clerks’ Mutual Benefit, 1872, DECREASED from 605 to 575. 

Masonic Life of Western New York, 1872, increased from 2,315 to 2,618. 

Masonic and Ministerial, 1872, DECREASED from 278 to 210. 

Odd Fellows Mutual Aid, 1869, increased from 303 to 488. 

Odd Fellows Mutual Benefit, 1867, DECREASED from 733 to 625. 

Polar Star Mutual Benefit, 1871, DECREASED from 414 to 382. 

Teachers’ Mutual Life, 1869, DECREASED from 2,093 to 2,083. 

Telegraphers’ Mutual Benefit, 1867, increased from 3,590 to 3,679. 

Western New York Masonic, 1871, DECREASED from 738 to 673. 

This is not a very hopeful exhibit for the older societies of this class. 

BUSINESS ORGANIZATIONS . 

The societies considered as on a business basis are those which em¬ 
ploy agents to*canvass and bring in members, which fact can be judged of 
by the ratio of the commissions to the new insurance. 


Of these societies there are seventy-one—sixty-four of which are 
under ten years of age. There are three societies from ten to fourteen 
years old, whose names and conditions are briefly stated below. 

Ten to Fourteen Years Old. 

Farmers’ Mutual Benefit, 1877, membership DECREASED in 1887 from 648 to 592. 

Masonic Benevolent Association, 1874, DECREASED from 5.854 t° 5 > IO °- 

New England Mutual Aid, 1878, DECREASED 2,108 to 1,910. 

Over Fifteen Years Old. 

There are four societies fifteen years old and upwards, viz.: 

Albany Masonic Relief, 1870, DECREASED from 1,005 to 963- 

Mutual Benefit Life Company, 1869, increased from 2,784 to 2,811. (Cash 
assets, $51,450.00; cash liabilities, $49,937.00.) 

Northern Tier Masonic, 1872, DECREASED from 461 to 365. 

Southern Tier Masonic, 1868, DECREASED from 2,714 to 2,291. 

An inspection of the above will enable each reader to judge whether 
any co-operative insurance association on a business basis is now in a 
flourishing condition after a test of fifteen or more years. 

David Parks Fackler, 

20 Nassau Street, New York. Consulting Actuary. 











Rates of Assessments 


T HE leading Assessment Society of to-day like the former leader 
the “ United Brethren Mutual Aid, used to boast of its “scientific 
system under which the death losses would be assessed each year 
according to a scale increasing with the age of its members. 

Now however, finding that such increasing charges are very 
unpopular with its members , who were promised good insurance at 
impracticable figures, it tries to make out that the interest on its safety 
fund will be sufficient to offset the otherwise necessary increments to the 
annual cost. 

Very craftily the Association takes as an example the ages 25 and 
26, at which the yearly increase is slight, and is offset by assuming 5 
per cent, interest to be earned on the safety funds at these ages, and 
though this is a higher rate than is legal for insurance calculations and 
also probably higher than is paid by the Trust Company in which their 
funds are invested, we will grant that for the present their theories may 
hold good at such young ages. 

But let us compare the Association’s figures with those for age 50:— 
at ag'e 26 the net cost of insuring $1,000.00 according to the American Table 
of Mortality quoted by the Association is only 6p2 cents more than at age 
25, an increase of only 8-10 of one per cent, on the cost at age 25, viz., 
$8.06: at age 51 the net cost is 76 cents or over 5 P ei cent, moie than at 
age 50; that is, the increase is seven times greater in pioportion, while the 
safety fund is no greater in proportion, at age 5°> than at age 25. 


ust Increase with Age. 


Take the case of age 70 (for the Association reports members even 
75 years old!)— at age 71 the net cost is $5.67 or over 9 per cent, greater 
than at age 70, that is to say, the increase is eleven times greater in pro¬ 
portion than at age 25. 

It is therefore clear that if the rate of assessment is to be kept 
unchanged at all ages, the annual increase in death losses due to the 
ageing of the older members will be saddled upon the younger members. 

The way the older members of this Association have thus far been 
favored at the expense of the younger, is very clearly shown by a table 
published in the circulars issued up to about April 1887, in which the 
“minimum” rate of assessment at age 25 is put down as $1.00 but the 
insured shall be liable to pay during the year $10.76, or the amount of 
about 10 % assessments—while at age 60 the “ minimum ” single assess¬ 
ment is $4.50, but the person will be liable for only $35.60 during the year, 
or less than 8 assessments at the above rates, against the younger man s 
10-M assessments ; the age of 50 is similarly favored, the rate being $2.00 
at each assessment, but limited to $18.37 m a year, which is not quite 9 1-5 
assessments. 

These are fair samples of the way scientific principles and justice 
have alike been disregarded in devising the plans of the Association. 

Let not elderly men however, think that they can go into it safelv, 
for the scale of charges may be changed any day and made to applv 
backwards as shown on page 21, which was practically illustrated by the 












20 


PRACTICAL ILLUSTRATIONS OF LIFE INSURANCE. 


issue of new tables in April 1887, under which the maximum charge for 
age 60 was increased from $35.60 as above to $40.70 ! Hereafter, when 
it becomes desirable to freeze out the old men, the officers may increase 
the maximum charge by another $5.00 or even $10.00 ; for there is nothing 
to prevent them, the contract binding no one but the insured. 

The absolute necessity for increasing the assessment rates yearly is 
further confirmed by an apt quotation from a letter of the eminent Inde¬ 
pendent Actuary , Mr. David Parks Fackler, published in the Insurance 
Times in 1883: 

“ If the death funds of a society are to be raised only as the deaths 
occur, each member should contribute for current claims just in proportion 
to the risk of death at his own current age. 

“That any other system would be inequitable—must, it seems to 

me—be as clear to all persons of average sense, as that two and two will 
always make four; if a ny such say they cannot see it, that only shows they 
do not want to see it. Excuse a ny apparent curtness, but the matter 
will not admit of argument." 

The same eminent authority, after thirty years' experience, lately 
wrote on this topic as follows: 

“ The impracticability of keeping the annual assessment charges 
down to what they were for the age at entry was well illustrated by the 
experience of what was once the banner co-operative society, the United 
Brethren Mutual Aid of Lebanon, Pa. This society began business in 
1870, and by 1877 had attained a membership of 14,000 and about 


$20,000,000.00 of insurance; it boasted of its ‘ scientific ’ system and its 
‘reserve fund’ which would ‘ensure perpetuity.’ The concern is believed 
to have been honestly managed, but the average annual cost of insurance 
per $1,000.00, without counting expenses, has been as follows: 


Beginning with the year 1876, $12.14 

“ “ “ 1877, 16.70 

“ “ “ 1878, 18.90 

“ “ “ 1879, 23.20 

“ “ “ 1880, 25.20 

“ “ “ 1881, 28.20 


Beginning with the year 1882, $29.20 
“ “ “ 1883, 34.70 

“ “ “ 1884, 33.87 

“ “ “ 1885, 39.20 

“ “ “ 1886, 39.94 

“ “ “ 1887, 42.40 


“Add to this the average expense of over $5.00 per thousand it will 
be seen that the total average cost was nearly $50.00 per thousand for the 
year 1887, and is probably all of that for the year 1888. Its membership is 
now only about half what it was ten years ago, and its entire dissolution 
seems only a matter of a few years. 

“Very fitly did Elizur Wright call such societies ‘co-duperatives.’ ” 
We have given already, on page 4, just after a copy of the American 
Experience Table of Mortality, the unequivocal opinion of the author of 
the same, Mr. Sheppard Homans, as to the absolute necessity of increasing 
rates as the ages of members advance. These two gentlemen are 
acknowledged authorities and leaders in sound insurance mathematics. 
There are many others engaged as actuaries for individual companies who 
are competent to judge the mathematical necessity of annually increas¬ 
ing rates in assessment insurance, but we do not know any professional 
actuary, who does , would or could say anything to the contrary. 


SYSTEM” WITH OVER TEN THOUSAND PER CENT. INJUSTICE. 

Th „ Arnf . riran Fxoerience Table shows that a person insuring at age 20, paying $78.04 as his just share for the first year’s insurance, if kept at that rate, pays in five years $390.20 only; whereas, on the increas- 
'ale he ought to have paid total $30^4. (see table, page 4). Thus, on the non-increasing system, a member now aged 25 was saved only $5.14 during the last five years, while on the other hand, a member 

reported December 31, 1887, as aged 75, 


ing scale ^he ought to ha^e ^chargmd all the "previous five years at the rate of age 70 only, has saved $606.32 or" OVER 11,000 PER cent, more at the expense of the younger and middle aged members. 
























The As sessment, or one-sided Contract. 

I he Application on which the contract is based binds the insured to anything the Society may require hereafter; it contains two lengthy 

tormal statements, called declaiations, of which, we give fac- similes below;— 

1 lie cIRSi declaration is at the foot of the first page of the Application, and reads as follows: 

1 T ., ,S C ER „ E TA A t R ^, NTED by the ?PPl> c ant, that the answers and statements in this application, Parts i and 2 , whether written by his own hand or not, are full, complete, and true, and^tjs agreed thatwairanty^shan forni the^basU 


Association" with ?hAiTndme^°s 1 n?a(-le" et tlA n ' the , unde . rs 'Sa e d and The*————L^F^^ sstrciATioN^'and^a^’offereTto^sai^Assocration, *as* a "consiieration 'of the'Contract "applied for, °and the Constitution or By-Laws of said 
rhe im^emin^ or anstTrTm^T n„ - de or that ma y hereafter be made thereto, together with this Application, are hereby made part of any Certificate that may be issued on this Application. And the applicant further agrees that if any of 
Association then fhe Cerf^dL , K ^ "?V true ’ ful L’ and complete, or if he or his representatives shall omit or neglect to make any payment as required by the conditions of such Certificate, or by the Constitution or By-Laws of sa d 
Association 1 If T Whv A 1 be he [ eon ' sha11 be null and void, and the officers of said Association may cancel said Certificate and the same shall be returned to them, and all money paid thereon shall be forfeited to said 

Animation" and inOfmOOX, « P i ssI y. a S r IL ed that the person soliciting or taking this application, and also the Medical Examiner shall be and are my Agents and not the Agents of said Association as to all answers and statements in this 
statements referred tT h y T officers at tl ? e Home Office of the Association, in the City of New York, have authority to determine whether or not a Certificate shall issue on any Application, and as they act on the written answersand 

hl LTdiW on the A ’ n .° answers, statements, or information made or given by or to the person soliciting or taking this application for a Certificate, or by or to the Medical Examiner, or by or to any other person or to the A ssociation, shall 
Office 3 L I^ a ,0n L° rln any manner affect its rights, unless such answers, statements, or information be reduced to writing and contained in this Application, and presented to the officers of the Association a< the Home 
’ - ^, P n hereby expressly waives any and all provisions of law now existing or that may hereafter exist, preventing any physician from disclosing any information acquired in attending the applicant in a professional capac y or 

otherwise, or rendering him incompetent as a witness in any way whatever, and for himself and for any person accepting or acquiring any interest in such certificate authorizes and requests any such physician to testify concerning the health 



c i i . • , -,-* v *“‘‘ uiane any payment as required by me conditions oi suen t^ertincate, nor snau it uc iwwc u ucam anon uv -:-*—:— 1 r * * _ „a _n 

of any law, but in each and every such case said Certificate shall be null and void, and all payments made thereon forfeited to the Association, and I hereby agree to pay dues annually in advance at the rate of $3.00 per thousand, and all 
mortuary assessments so long as such Certificate or Policy shall remain in force. 

This risk is recommended by me as a good risk, I am a witness to the signatures, which 
I certify to be genuine, and the answers herein, and all of them are true to the best of my 
knowledge and information. 


Dated at. 


.188 


Signature of Applicant I 
for membership in I 
this Association. 


Name of the I 
Beneficiary. | 


As the above type is too small and the lines too close to be legible, we give below in larger type, the important clauses which generally escape 

attention 


“The person soliciting or taking the Application and also the 
Medical Examiner shall be and are my Agents, and not the Agents of 
said Association as to all answers and statements in this Application, 
* * * * and I hereby agree to pay dues annually in ad¬ 

vance, at the rate of $3.00 per thousand, and all mortuary assessments 
so long as such certificate or policy shall remain in force. 


“ The Constitution and By-laws of said Association, with the amend¬ 
ments made or that may hereafter be made thereto, together with this Ap¬ 
plication, are hereby made part of any Certificate that may be issued on 
this Application. * * * * If he or his representatives shall 

omit or neglect to make any payment required by the conditions of such 
Certificate, or by the Constitution and By-laws of the Association, then 
the Certificate issued hereon shall be null and void.” * * * 

It will be observed that the applicant is made responsible for the correctness of the Medical Examiners report; and also that he cannot throw 
off responsibility by discontinuing payments simply, for, as certificates that have been five years in force, remain in foice six months, and those ten 

years in force twelve months after discontinuance of payment, he will be liable much longer than he supposes. 

The second declaration is in the medical examination where the applicant would least expect it (and probably does not have his attention 

called to it). 


I do hereby warrant, that the foregoing answers, written 

contract of my Certificate of Membership in the - Life 

as below 


to the above questions, are my answers, and are full, complete, correct, and true, and the same shall be made a part of the 
Association, and that I am the person who signed the application on the reverse side of this Application, and was examined 
and should This application for membership be accepted, I do’thereupon constitute and appoint (the President of the Association) of New York, State of New York, or, in the 
Kverntive Committee of said Association, or a majority thereof, my sole, true and lawful Attorney and Agent for me and in my name, place and stead to vote as my 
O ro" , a«ordtftk thenumberofI wo.Mbe entitled to ’cast if pLoially present, a. each and every General, Annual, or Ipecia. Meettng of fhe MUTUAL - L.pe Assoc™ 

of New York, or the Subscribers or Members thereof, for theemuTandTall continue InMil force untilat least'ihirty days after a notice, in writing, expressly revoking or suspending the same 
shall hTvA P ™ leSd^ - t-* ”T".e5, This proxy shall no, be^pelativc a, any Meeting of the Assoc,a,ion 

at which the undersigned is present in person. 

SIGNATURE OF MEDICAL ) 

EXAMINER AS WITNESS. ) 


SIGNATURE OF 
,M.D. APPLICANT. 


SEAL. 






























Liability of Certificate-Holders. 


T HE members of assessment societies generally suppose that they 
can drop their membership at will by simply neglecting to 
pay an assessment, but this is a great mistake, as many persons have 
learned at heavy cost after fighting in the courts, which have decided as 
follows:— 

Membership is not terminable by merely refusing to pay an 
assessment. The certificate holder must pay all liabilities which accrue up 
to date of his perfected withdrawal. 

A member does not cease to be such until he has made his with¬ 
drawal complete according to the terms of his contract; he remains liable 
for losses which follow. 

Each member holding a certificate which was in force at the time of 
the death of another member is legally bound to pay. 

The Association is legally bound to enforce payment. 

If the officers of an association do not assess and collect, the court, 
at additional expense, may do so through its own officers. 

An association can refuse to release a member, and can compel him 
to pay each assessment as it occurs. 

Receivers may sue members for back assessments. 

Forfeiture of his own rights does not necessarily relieve a member 
from liability to others. 

See “The Law of Membership in Co-operative and Assess¬ 
ment Life Associations” published by the Insurance Monitor in 1886. 

In New York State the most prominent case quoted is that brought 


against William H. Ross-Lewin by the Receiver of a Society in which 
the former took two certificates in March, 1881—he paid assessments on 
lune 28 and September 8, 1881, but, when served with notices to pay two 
assessments dated September 28th, he decided not to pay, supposing that 
would end his membership; but it did not. The society failed and a 
receiver was appointed, who sued the defaulting members. In the test 
case mentioned, the court decided that the members must pay not only the 
assessments mentioned, but all the liabilities that had acciued until their 
membership was legally severed. In the banner assessment association, 
in some instances, it will require a lapse of twelve months to release a 
member, who will thus remain all that time liable for its losses. 

The Insurance Monitor makes the following apt remarks : 

“Throughout the rural districts thousands of guileless farmers and 
country merchants have, from time to time, been ensnared into member¬ 
ship with mutual fire associations under pledges whose true legal character 
was only discovered when adversity called for a final settlement in the 
courts. Rude as was the awakening in their case, the public shock will be 
vastly greater as the members of similar life organizations suddenly learn 
from the tribunals that their pledges are binding while the organization 
subsists, that the responsible member cannot free himself from liability, but 
must maintain his payments to the end.” 

Now, then, to dissipate all idea that associations or societies can 
release their members from any such liability , we append the following 
recent correspondence, which will speak for itself: 










18 


gc-Hcij, 

[Established 1859.] 

PROMPT ATTENTION GIVEN TO INSURANCE CLAIMS OF ALL KINDS. 

atib 2(3 Si (Wtj Street, 0 levu ©ctoW 3 U, 1888 . 

Between Nassau and William. jj q* g Qv x g 


ficiiwrcil 9 mm i ^cilice fit 

L r 


Hon. Robt. A. Maxwell, 

Supt. Insurance Department, 

Albany, New York. 

Dear Sir: 

While preparing a treatise in practical illustration of the two principal systems 
of Life Insurance now prevailing, I came across a certificate of insurance in an 
assessment association (enclosed herewith), which contains a stipulation (see section XI*), 
intended to countervail the personal liability of its members on their mutual contracts. I 
enclose also a publication of the Insurance Monitor of this City, in 1886, treating of the 
Law of Membership in Co-operative and Assessment Life Associations. 

That such liability is binding on every member, as against or in favor of each 
other, has always been affirmatively decided by the Courts, and I would respectfully 
submit to you the question, whether the incorporating of said section XI, or words to 
that effect, in a membership certificate can annul or modify the liability of a certificate- 
holder, thus contravening statutory law ; or is it not held by your department that if 
any assessment society, when going into the hands of a receiver, has, say 200 claims 
unpaid, the holder of a certificate at the closing of the concern is liable for one 
assessment on each certificate which has become a claim while he was such member? 

With thanks in advance, I am, 

Yours very truly, 

(Signed) J. J. Habricii. 

* XI. No personal liability of the member is incurred by becoming a member of this Association, and 
the continuance of this Certificate, or Policy of Insurance, and payments by the member are voluntary, at the 
option of the member, to continue only so long as the member may desire to keep this Certificate, or Policy of 
Insurance, in force, but a failure to make the payments as herein stipulated will terminate this Contract. This 
Contract, on the part of the Association, is a bi-monthly term Contract, renewable at the option of the member, 
before expiration, upon payment of the dues and mortuary premiums at the times and in the manner in this Con¬ 
tract provided. 


Enclosures. 



Mr. J. J. Habrich, 

General Insurance Agency, 

18 & 20 Liberty Street, N. Y. .City. 

Dear Sir:- 

Your letter of the 31st, ulto., enclosing specimen 
copy of certificate of membership in an Assessment Insurance Asso¬ 
ciation and Insurance Monitor pamphlet, at hand. 

Notwithstanding the provisions in Section XI, marked, this De¬ 
partment considers the principles laid down by the Supreme Court 
in the case of Me Donald, Receiver of Mutual Benefit Association vs 
Ross-Lewin, 29 Hun 87, same case in New York Ins. Report 1884, p. 
359, as sound , and that an association cannot exempt a member 
from the legal liability attaching from the fact of membership, as 
decided in that case. 

I return herewith the enclosures referred to. 

Yours respectfully, 



Superintendent. 












From “'rhe Independent.’’ 


W E cannot refrain from quoting a few passages on Assessment 
Insurance in general and referring to their banner association 
in particular, published November 22, 1888, in New York Independ¬ 
ent. a journal which, in its ably written articles, has fearlessly and 
forcibly uttered notes of warning against the Assessment craze prevailing 
among us. 

The Independent deserves great praise for its earnest and persist¬ 
ent efforts to protect the public. Insinuations that it is “prejudiced” are 
no answers to its forcible arguments. 

What more holy duty has the press than to expose delusive 
schemes which endanger the interests of millions of wives and children, 
and are sure to inflict disaster in the “ nearest ” future. 

“ There is no prospect that the —-will outlive the majority of 

persons to whom it has already granted certificates. The indications all point to its early 
decease ; and one of the indications is its readiness to go into the Board of Trade Building 
Association scheme. It seems to be grasping at any and every straw to secure ‘ new blood,’ 
hoping thereby to prolong its life and postpone the evil day which is so surely coming. Its 
statements cannot be relied upon. 

“ The circular referred to states that the - - has a cash surplus emergency 

fund of $1,750,000.00. In reply to this it is only necessary to call attention to the fact that 
on December 31, 1887, the date of the last report to the State Department, its total cash 
invested assets amounted to $1,472,200,49, and from this should be deducted the amount of 


its liabilities for unpaid ‘claims on death losses’ which amounted to $439,694.00, thus leaving 
the cash assets only $1,032,506.49. It owed on the 3 1st of December. 1887, f or death losses, 
one-third as much as it paid for similar claims during the entire year. It has a chronic tendency 
to defer payments on claims, to compromise claims, and to refuse payments altogether. It 
has become known as the ‘ Great Repudiator.’ During the year 1887 certificate-holders 
having so-called insurance to the amount of $28,944,250.00, allowed their certificates to lapse. 
This gives a little inkling of the feeling which has been aroused among the certificate-holders 

of the Association in regard to their liability and responsibility. The insurance in the - 

- - Life Association will no doubt be valueless. Associations similar in many 

respects to the - -- -——— Life Association are failing by the score. Since 

January 1, 1883, no less than 108 of the assessment associations which then reported to the 
Insurance Department of the State of New York have ceased to do business—they have 
failed. In the five years previous to January 1, 1888, we have a record of nearly 750 of 
similar associations as having failed throughout the country. Since January 1, 1888, large 
numbers of these associations—some of them very prominent ones—have failed. All of them 

must fail, including the - Life Association. As we have repeatedly shown in these 

columns, no association conducted upon the same plan and the same principle as the —— 
Life Association, can succeed. They must fail. There is no hope for them. Any man who 

knows anything about insurance by simply taking the seven years’ record of the-Life 

Association and following it down from year to year, noting their large increase in assess¬ 
ments and their large increase in death rate can read the handwriting on the wall as plainly 

as we can. We say once more ‘ do not go into this --Life Association scheme expecting 

to get reliable Life Insurance.’” 































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